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Interference in
the labour
market
Minimum Wage
A
minimum amount per hour which most
workers are entitled to be paid.
 U.S.
minimum wage is 15,000 USD /year
 Ghana
minimum wage is 689 USD/year
Reasons for Minimum Wages
 Increases
the standard of living for the
poorest and most vulnerable people in
society.
 Hopefully this would reduce poverty.
Reasons for Minimum Wages
 Stimulates
consumption by putting more
money into the hands of people who
quickly spend their entire paycheck.
The Effects of Minimum Wage
Legislation
 This
can be illustrated using supply and
demand .
Reasons Against Minimum
Wages
 Some
people are willing to work for less,
yet employers cannot hire them at that
wage rate.
 Reduces
the quantity of workers
demanded.
 May
cause price inflation.
Do minimum wages cause job
losses?
 Answer
this correctly and you can skip the
remaining economics classes for the
year.
 How does the elasticity of demand affect
your answer?
 What if the minimum wage is the same as
the equilibrium wage?
 What about the studies in your book?
Trade Unions
 These
are organisations that exist to
protect the interests of workers.
 Remember
the voice of all is stronger than
the voice of one.
Trade Unions
 They
negotiate pay and working
conditions.
 They
provide legal protection.
 They
can put pressure on governments.
Trade Unions
A
strong trade union can force wage
rates to go up in some labour markets.
 This
wage rate may be above the
equilibrium price for that kind of labour.
 This
is not market efficiency at its best.
Trade Unions
 How
would you feel about a strong trade
union if you were an employee of a
business?
 How
would you feel if you were the owner
of the business?
Factors To Consider
 Elasticity


of demand for labour.
Machines do not go on strike.
Machines do not need dental insurance.
 Does
the employer need to hire only
union employees?
 Does
the employee need to be a
member of the union?